New Wrinkles in Smithfield Sale
September 5th, 2013
The proposed sale of US pork processing giant Smithfield Foods to Chinese food company Shuanghui is receiving new scrutiny from investors and Senators. As we noted when the deal was proposed back in May, this potential purchase raises concerns of further consolidation in the US pork industry. Smithfield already controls nearly a third of the US pork processing industry and is one of four companies which together control 70 percent of the industry.
Several Senators have taken notice, and the Senate Agriculture Committee held a hearing in July at which several witnesses testified on the acquisition’s potential effects on US food safety, consumer prices, and competition in the pork industry. In fact, Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) published an op-ed in Politico yesterday attacking the sale as a threat to US intellectual property and a way for the Chinese government to take advantage of agricultural research funded by American taxpayers. This op-ed follows the letter submitted by Stabenow, Ranking Member Thad Cochran (R-MS), and other members of the Senate Agriculture Committee to the Secretary of Treasury, urging him to consider these issues in his capacity as chair of the Committee on Foreign Investment in the United States (CFIUS). CFIUS must certify that Shuanghui’s purchase of Smithfield is not a threat to US national security in order for it to go forward.
CFIUS is expected to reach a decision soon, and the financial rumor mill buzzing around the supposedly secret Committee indicates they will allow the sale to move forward. A new development, however, has the potential to upend the deal. The investor group Starboard Value, which already owns a 5.7 percent stake in Smithfield, has announced it is in the process of putting together an offer for Smithfield that is “substantially” larger than the $4.7 billion bid by Shuanghui. Starboard is asking the Smithfield board to delay the scheduled September 24 vote on the Shuanghui acquisition in order to give it more time to complete the proposal, which would split Smithfield into three parts: hog farms, pork sales, and international operations.